Dave Ramsey: Move back home after college?

Wednesday

Jun 27, 2012 at 12:01 AMJun 27, 2012 at 3:55 AM

Weekly financial Q-and-A, with advice on moving back home after college in order to save money, and whole life insurance policies.

Dear Dave,

My son has worked and saved all through school and will be graduating this year with a degree in electrical engineering. He has a job waiting for him when he finishes, and he wants to move out on his own then. I think he should continue to live at home and save up more money. What do you think?

Sue

Dear Sue,

Honestly, I think he should move out. This situation isn’t about money as much as it’s about your son becoming a man. At this point in his life it’s going to be really good for him, emotionally and spiritually, to stand on his own two feet.

It sounds like you’ve got some good ideas about saving and financial responsibility, and he needs to take some of Mom’s advice in those areas. But it’s time he had his own place and started paying his own bills. It’s time for this one to leave the nest, spread his wings and fly.

Here’s something else to think about. He’s going to look a whole lot better to the world if he’s out there standing on his own. I think lots of young ladies, not to mention their parents, will be much more impressed by a guy who’s making his own way rather than living at home with mom.

He’s at a point where he’s reaching for dignity and trying to make his way in the world. Let him do it. I’ve got a feeling he’ll make you proud!

Whole life for adult kids?

Dear Dave,

My husband and I have about $50,000 in debt. It started piling up several years ago when one of our sons was injured. He’s 33, his brother is 23, and we’ve got whole life insurance policies on each of them. The combined cash value of the policies is about $21,000. Should we sell them in order to help pay down our debt?

Lori

Dear Lori,

You’re not responsible for the final expenses of a 33-year-old or a 23-year-old. And the fact that they’re your sons doesn’t change anything.

Whole life insurance is a horrible investment. The rate of return is almost nothing. When someone dies with these policies, the extra money you paid to create the cash value is wasted, because the insurance company keeps the cash value. They only pay out the face value! That’s not what I call smart investing.

If it were me, I’d cash in both of the policies immediately. Now, if either of them has become uninsurable and you want to transfer a policy to them, that’s fine. Otherwise, they both need to take care of their own insurance and other financial needs.

You guys are staring at a lot of debt, and $21,000 will go a long way toward cleaning up that mess. Cash them in!

Dave Ramsey is America’s most trusted voice on money and business. He’s authored four New York Times best-selling books: “Financial Peace,” “More Than Enough,” “The Total Money Makeover” and “EntreLeadership.” The “Dave Ramsey Show” is heard by more than 5 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the Web at daveramsey.com.

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